1 st QUARTER REPORT FOR PERIOD ENDING 30 JUNE August 2015 TO THE PARLIAMENT PORTFOLIO COMMITTEE ON TELECOMMUNICATIONS AND POSTAL SERVICES

CONTENTS 1.PERFORMANCE OVERVIEW 2.FINANCIAL PERFORMANCE 3.DUAL ILLUMINATION 4.REVENUE PER SERVICE 5.PRE-DETERMINED OBJECTIVES 6.KEY PROJECTS PROGRESS 7.HUMAN RESOURCES

Q1 Performance Overview Q1 Highlights  Revenue from continuing business: 4% (R9 million) above budget DTH - 7% Facilities Rental – 12%  Earnings Before Interest and Taxes (EBIT) – 74% (R27 million) above budget.  13 th Cheque facility agreement with the employees  5 out of 6 services exceeded the SLA targets of network availability.  Leadership Development Programme Graduation ceremony  Commissioned 2 Greenfield sites: Harrismith Ngqeleni

Financial Performance Q1 Q1 FY2015 ActualBudgetVariance ActualVariance R'000 % % Revenue - Continuing operations % % Dual Illumination % % Other Revenue % % Total Revenue % % Cost of Sales ( ) ( ) % ( ) (24 472)(17%) Gross Profit % % Overheads (57 593) (69 379) % (53 610) (3 983)(7%) Operating expenses (15 148) (21 713) % (16 566) % Administrative expenses (38 678) (41 131) % (34 978) (3 700)(11%) Selling expenses (3 767) (6 535) % (2 066) (1 701)(82%) Operating profit % % Net Finance income % (2 511)(19%) Net profit before taxation % % Variance analysis Revenue Growth: DTH Once-Off billing contributed positively. FM SABC Analogue to Digital conversion and NW FM expansion. Facility Rentals - 14 additional services were activated during the period. Expenditure: Operating costs were lower than budget for the period due to for example, negotiated satellite rental fees and delays in some of the planned initiatives, refer to KPI discussions. When compared to FY2015, selling costs increased by R1.7million primarily due to the CSI commitments in the previous year.

Dual Illumination Funding Deficit Description Amount (R’000) FY saving 3,072 Funding Allocation from National Treasury FY (Net of VAT) 95,614 Funding available at the beginning of year 98,686 Utilized in Q1 28,126 Available for the remainder of FY ,560 Estimated incremental costs for the remainder of FY ,043 Projected incremental costs funding deficit (32,483) Dual illumination activities are in respect of incremental costs arising from running the analogue and the digital networks simultaneously, and this will continue until analogue switch-off. The estimated incremental cost for dual illumination for the FY2016 is R131m, and the funds allocated amount to R99m, thus leaving a funding deficit of R32m.

Revenue Per Service (Year on Year) Q1 FY2016 Q1 FY2015 Debtors FY2016 Community Broadcasters ActualBudgetVariance ActualVarianceActual SERVICER'000 % % Analogue TV % % FM % % MW (23)(1%) % SW (294)(4%) % DTH % % Facility Rentals % %(4 002)0 VSAT (928)(37%) (1 767)(52%) Consulting % %1110 Total Revenue % % Variance analysis Revenue Growth: DTH - Growth as a result of new customers signed. Facility Rentals - 14 new services were activated during Q1. VSAT - Cancellations by USAASA & KZN DOE impacted negatively and the company is reviewing the business case for continuing this business. Consulting - Fees charged for services rendered to the Lesotho Broadcasting Corporation.

Pre-Determined Objectives (“PDO”) Legend PerformanceQ1 Achieved 100% and above5 Partially Achieved 50% - 99%3 Not Achieved 0% - 49%4 Quarter 1 Target12

PDO-Non Achievement KPIQ1 TARGETQ1 PROGRESSCURRENT STATUS Cover Ratio for Succession Talent Management Training For All Non-Bargaining Unit Staff Members Talent management training not conducted for all non- bargaining unit employees This target has not been achieved due to the primary focus on re-training on performance management in order to fast track the process on bargaining unit employees contracting. Whilst there are employees within the bargaining unit that have since contracted, the new target is to finalise contracting within Q2. Organisational design and implementation of macro functional structures Design top layer structure for Executives and Heads Top Layer Structure for Executives and Heads is incomplete Delays in sourcing the services of a suitable service provider has impacted this negatively. Progress has since been made and it is anticipated that the work will begin within the 2 nd quarter. Enterprise and Supplier Development Achieve 20% of budgeted Enterprise and Supplier Development Strategy spend 5.4% of budgeted ESD spent. The incubation programme launch was delayed to Q2. The selection or screening process took longer than anticipated. All beneficiaries for Phase One of the programme have since been identified and the launch is scheduled for August FM Services implemented 9 Community Radio Broadcasters Connected 2 Community Radio Broadcasters Connected There were delays in the connection of these Broadcasters due to delays ranging from studio readiness, supply by Telkom of service as well as delivery of customised equipment. Since Q1 end, 4 broadcasting sites are connected and the remaining studios will be on Air in Q2.

PDO-Non Achievement Signing performance contracts by SENTECH employees NON-BARGAINING: 100% ACHIEVED: 100% SHORTFALL: 0 BARGAINING UNIT: 90% ACHIEVED: 0% SHORTFALL: 100% Gratuity payments to bargaining unit staff – commitment to sign performance contracts. Consultation with the Union on the performance management system (PMS). Follow SENTECH short-term incentive scheme – guidelines. Consultations with employees. Guaranteed 13 th Cheque demands  Resulted in the halting of all other consultations, until an agreement.  Resolution reached in May SENTECH resumed the process of implementing the performance management system in line with the approved policy. SENTECH commitment to implement PMS.  Continuous further engagements with Union and staff to address individual concerns 2014: BACKGROUND 2015: PROGRESS MADE WAY FORWARD

Government key projects Programme NameProject Update DTT Migration Programme Migration of 178 Analogue terrestrial transmitter sites to Digital is complete. Successful switch on of the Harrismith & Ngqeleni Greenfield Sites (84.46% Population coverage) and the remaining 2 sites are in progress SENTECH has completed an ASO Plan and communicated this to major stakeholders including, but not limited to, USAASA, ICASA, Department of Communications, etc. The D2D migration project plan has been presented to the Shareholder and forms part of the MTEF funds request to the National Treasury for the 2016/2017 Financial Year. DTT Tariff affordability for Community Broadcasters – SENTECH is engaging Community Broadcasters in attempt to find a solution together with Department of Communications. Business Continuity Plan Project IT and Technology Disaster Recovery elements are still ongoing with progress being achieved in Q1 as follows: The installation of equipment has been completed at Brixton Tower The Data Domain solution was designed and the equipment delivered. Satellite equipment delivery has been delayed however Electrical and civil work will commence on site during Q2.

HUMAN RESOURCES The company had 539 staff complement at the end of the first quarter. Appointments 24 appointments were made (internally and externally) of which 63% are black and 29% were black females. At the end of the Quarter the company had a total of 19 learners Terminations The company had 5 terminations, 2 at senior management level, 2 at professional/ skilled level and 1 at semi skilled. Staff turnover rate for Q1 was 0.9%.

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